February 21, 2018

Concerns Remain for Argentina

February 20th, 2018

Good Morning! From Allendale, Inc. with the early morning commentary for February 20, 2018.  

Grain markets monitor the latest forecasts out of Argentina as concerns remain for their crops. Outside markets turn their attention to the stock market after yesterday's holiday to see if the recent volatility will return.

Rains fell in Argentina over the weekend, however, meteorologists still have concerns. World Weather stated, "The temporary improvement in crops across central Buenos Aires will last a few days this week, but most areas will become critically dry again by late this week or into the weekend. Temperatures will cool down for a while and that will help conserve soil moisture in Buenos Aires.  Much greater rain is needed for all of Argentina and World Weather, Inc. believes March will be the earliest that greater rain may fall."

The drought afflicting Argentina since November has shriveled soy yields to the point that analysts and farmers have slashed harvest estimates by about 10 million tonnes, with final crop forecasts consolidating under the 50 million tonne mark. The dryness has walloped the heart of the normally fertile Pampas grains belt in Argentina, world's top exporter of soymeal livestock feed and No. 3 supplier of raw soybeans and corn. (Reuters)

Safras & Mercado estimate Brazil's current soybean crop at 115.6 million tonnes. If realized, it would represent a record production for the country, and 1.2% higher than last years record of 114.2 million tonnes.

Corn and Soy products moving through Brazil's new northern ports have increased by 80% compared to last year according to stats from Brazil's Antaq agency. The new terminals are closer to grain buyers in Asia and Europe which reduces their shipping cost and makes Brazils products more competitive on the world stage.

Egypt's ag ministry will set its local buying price for wheat next month, ahead of their harvest. They did not announce if they would tie local prices to world prices as they did this year, or subsidize their farmers by paying more than world prices.

USDA’s 94th Annual Agricultural Outlook Form will be held this week on Thursday and Friday. The industry will get the first peak of what USDA is expecting for the 2018 crop.

Commitments of Traders showed managed money funds were buyers of 72,310 contracts of corn through the week ending February 13th. This left their net position near flat at -10,614. In soybeans, funds were net buyers of 52,847 contracts, and are now long 42,869 contracts. Funds bought 26,563 wheat contracts to reduce their short position to -56,831.

Funds on Friday were estimated sellers of 3,000 corn, 7,000 soybeans, 3,500 wheat, and 3,000 soyoil. They were buyers of 2,000 soymeal.

The economic calendar is light this week, but does have home sales data, as well as Initial and Continuing jobless claims midweek.

Managed money funds were buyers of 1,566 Live Cattle contracts through last Tuesday. They were reported long 91,814 contracts. In Lean Hogs, they were sellers of 18,477 contracts to reduce their long position to 20,797.

Cash cattle traded at $130 in Kansas and Texas, $129 in Iowa, and $128 in Nebraska on a live basis on Friday.

USDA's estimate for the last weeks hog production came to 2.384 million head. That was right next to our 2.382 morning estimate. This number is 1.2% over last year. The previous four weeks averaged 1.4% over last year.

Weekly cattle slaughter estimate totaled 596,000 head. That was 3.4% over last year which is inline with the previous four weeks that were 3.6% larger than last year.

Dressed beef values were higher with choice up 2.69 and select up 2.31. The CME Feeder Index is 148.15. Pork cutout value is up 1.02.

Technical Chart of the Day

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